Crude Oil in Madagasacar: golden contracts for whom?

The oil exploitation sector’s technical days were the opportunity to lay the transparency card. The communication operation is a success for the OMNIS, the local national office for mining and strategic industries. The year 2010’s oil prospection report is encouraging: some 16 companies contracted 24 oil contracts with the OMNIS, the institution supposed to represent the Malagasy state. It comes up to 200, most of them offshore rigs.  

The onshore rigs are less widespread but a wee bit more juicy as the traditional Bemolanga and Tsimiroro fields. Prospection projects led by the french company Total in Bemolanga is the most advanced. Only 45% of potential oilfields are currently exploited. It represents 445 000 km² from 988 000 km². The country’s western part of the sedimentary basins are currently being prospected. There are many offshore projects throughout the Mozambique channel, while the isle’s southern fields are still to expect purchasers.  

Madagascar’s potential crude oil reserves are rated to 10 billions of barrels. This rather optimistic evaluation is still to be officially confirmed. The exploitation of the Bemolanga basin could produce up to 60 000 barrels per day. Regarding the crude oil’s courses on the international market, the Malagasy black gold is decidedly the 21st century’s new Eldorado. Companies are daring the greatest odds during the prospection phase. As a matter of fact, the Malagasy oil contract is told to be so juicy that it is a cause for controversies within the country itself.  

Oil contract  

In accordance with the Malagasy laws, contractors will pay royalties on the liquid Oil. The calculation will be based on the international course defined by the delivery point, and on the extracted quantity from exploitation perimeters. Contractors are able to deduct his legal royalties from his own reserves. The Government and/or the OMNIS are entitled to ask the Contractor to sell a share or all of the granted crude oil quantity to repay Royalties cash. Contractors will neither support losses nor make profits on such trade, volume of which is pre defined. 

The liquid Oil quantity equivalent for the Oil Profit will be shared between the OMNIS and the Contractor. Maths will be based on the pre defined contracted shares, and on a monthly defined liquid oil basic course. Contractors will be entitled to recover, deliver and freely export their share of the Oil Profit, and keep trade returns abroad. Crude Oil will only be rated at the delivery point. 

Contractors will be contributing to the home market supply from the crude oil share dedicated to the govenment. Prices at home will be depending on the international courses. The lines will be returning Direct taxes on Hydrocarbons calculated on the basis of results, in other words crude oil trade returns, representing the overall turnover, capital yield taxes and taxes on funds movement. The operator, in the name of the Contractors, will pay a production bonus to the OMNIS whenever the average production level will be reaching a defined number of Barrels per day during 90 consecutive days.  

Source: OMNIS